Supreme Industries (SUPIND) : Supreme in Plastic Industry..

Initiating Coverage
January 1, 2016
Supreme Industries (SUPIND)
Rating Matrix
Rating
Target
Target Period
Potential Upside
:
:
:
:
Buy
| 842
12 months
24%
YoY Growth (%)

FY15
8.0
18.6
13.7
13.7
Net Sales
EBITDA
Net Profit
EPS
9MFY16E
(28.5)
(37.6)
(45.3)
(45.3)
FY17E
66.3
106.7
138.5
124.0
FY18E
17.2
17.2
18.9
27.5
Current & target multiple

FY15
26.8
33.2
14.0
7.1
26.6
32.4
P/E
Target P/E
EV / EBITDA
P/BV
RoNW
RoCE
9MFY16E
49.1
60.7
22.5
6.6
13.4
18.9
FY17E
20.6
25.4
10.8
5.5
26.6
34.6
FY18E
17.3
21.4
9.2
4.8
27.6
36.8
Particulars
Bloomberg/Reuters code
Nifty
Average Volume (Year)
Market Capitalization
Total Debt (FY15)
Cash and Investments (FY15)
EV
52 week H/L (|)
Equity capital
Face value
MF Holding (%)
FII Holding (%)
SI:IN/SUPI.BO
7909.8
9988419
| 8650.5 Crore
| 331.5 Crore
| 181.8 Crore
| 8800.2 Crore
746/520
| 25.4 Crore
|1
7.4
21.2
Comparative return matrix (%)

Return %
Supreme Ind
Astral Polytec
Finolex Ind
1M
3.8
3.7
0.7
3M
8.7
2.5
17.1
6M
0.4
11.5
18.9
12M
12.3
9.9
18.3
Price movement
800
700
600
500
400
300
200
100
0
10,000
8,000
6,000
4,000
2,000
Price (R.H.S)
Nov-15
Jun-15
Feb-15
Oct-14
Jun-14
Jan-14
Sep-13
May-13
0
Dec-12
Supreme Industries (SIL) is a strong play in the Indian plastic industry with
plastic processing capacity of 4.5 lakh tonnes. We believe SIL is well placed
to benefit from Indias long term structural reform considering its diversified
product portfolio with strong brand, widespread geographic reach, strong
balance sheet that has enabled SIL to generate attractive RoCE & RoEs
consistently. The company envisages an outlay of ~ | 1500 crore to ramp
up capacity to 6.5 lakh tonnes by FY20. We believe various government
social programmes would help absorb the incremental capacity. In addition,
a gradual shift towards branded products coupled with implementation of
GST would help SIL add market share. We believe EBITDA margin will
improve in FY15-18E as passing on benefit of lower raw material prices
would be partially offset by rising contribution of value added products. We
expect consolidated sales, earnings CAGR of ~12%, ~16%, respectively, in
FY15-18E. We initiate coverage on SIL with a BUY recommendation.
Piping, packaging segment to drive future growth
Stock Data
Aug-12
| 681
Supreme in plastic industry...
Nifty (L.H.S)
Research Analyst
Sanjay Manyal
sanjay.manayal@icicisecurites.com
Hitesh Taunk
hitesh.taunk@icicisecurites.com
During FY11-15, the piping and packaging segment (out of four segments of
SIL) recorded a volume CAGR of ~11% and ~6%, respectively, led by
demand from housing and industrial segments. Going forward, with the
ramp up in infrastructure activities coupled with rising demand for quality
products in India, we believe plastic piping, packaging products volume will
record a CAGR of ~15%, ~13%, respectively, in FY15-18E. With the strong
distribution channel (~2500 dealers) in India, we believe sales of piping,
packaging segment will likely record CAGR of 16%, 13% for FY15-18E.
Valued added products (VAP): Play on premiumisation

SIL is taking concrete steps to increase VAPs contribution to total sales
from 31.7% in FY13 to 35% by FY20. VAPs commands EBITDA margin of
17% vs. 14.9% (in FY15) at company level. SIL foresees strong demand for
cross laminated products, CPVC and bathroom fittings from housing and
industrial segments. SIL is further awaiting government approval for a full
fledged launch of composite LPG cylinder in India that would further aid its
revenue and margin. We believe SIL would partially pass on the benefit of
lower raw material prices to customers. Hence, EBITDA margin would see
moderate growth of ~130 bps to ~16% for FY17E & FY18E.
Strong fundamental justifies premium valuations

At the CMP, SIL is trading at a PE multiple of 21x FY17E and 17x FY18E
earnings. We expect the company to maintain high RoE and RoCE
considering 1) Healthy topline growth backed by capex plan, 2) maintaining
higher operating margin and 3) Efficient working capital management
turning lower debt/equity ratio. We believe strong brand coupled with
sustained growth justify SIL to command premium valuations. We ascribe
PE multiple of 21x on FY18E earnings with TP of | 842 and BUY ratings.
Exhibit 1: Financial summery
(| Crore)
Net Sales
EBITDA
Net Profit
P/E (x)
Price / Book (x)
EPS (|)
EV/EBITDA (x)
RoCE (%)
RoE (%)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
FY14
3,905.2
531.7
283.4
30.5
8.3
22.3
17.0
31.8
27.3
FY15
4,219.5
630.5
322.4
26.8
7.1
25.4
14.0
32.4
26.6
9MFY16E
3,017.1
393.2
176.3
49.1
6.6
13.9
22.5
18.9
13.4
FY17E
5,018.4
812.7
420.6
20.6
5.5
33.1
10.8
34.6
26.6
FY18E
5,883.0
952.5
500.0
17.3
4.8
39.4
9.2
36.8
27.6
Company background
Shareholding pattern (Q1FY16)

Shareholding Pattern
Holdings (%)
Promoters
49.7
Institutional investors
28.6
Others
21.7
Institutional holding trend (%)

25
21.6
21.5
22.3
21.2
20
(%)
15
10
5.9
6.5
6.4
7.4
Q2FY15
Q3FY14
Q4FY15
Q1FY16
5
0
FII
DII
Founded in 1942, Supreme Industries (SIL) is Indias leading plastics

processing company, handling polymer volumes of over 3,20,000 tonnes
annually. SIL also has the widest and most comprehensive range of plastic
products in India. The company has a wide range of plastic products with a
variety of applications in plastic piping system, storage & material handling
products, moulded furniture, XF films & products (agriculture, industrial),
performance films (industrials), protective packaging products, composite
plastic products and petrochemicals. Apart from piping products used in
the housing segment, its products are used as components in automobile
parts, in material handling as crates/boxes and in furniture as tables/chairs.
In the refrigeration industry, they are used as doors/panels and in the
packaging industry for packing edible and hydrogenated oils.
SIL operates with 25 manufacturing facilities (two are yet to start) covering
almost all regions in India. The company has five business segments in the
plastic division, contributing ~97% of the consolidated topline in FY15.
These are: plastic piping, packaging, industrial, consumer and composite
product segments that contribute ~51%, 21%, 15%, 6% and 7% of total
plastic products revenue, respectively. SIL exhibited revenue CAGR of
14.7% in FY11-15 to | 4219 crore led by ~8% volume CAGR in the same
period. The plastic piping segment recorded revenue CAGR of ~20% led by
segment volume CAGR of 11% in FY11-15. In spite of continuous capacity
expansion (average annual capex of | 220 crore), the debt/equity ratio has
improved from 0.9x in FY11 to 0.3x in FY15 as the company generated
strong cash flow from operations during the same period.
Exhibit 2: Revenue break-up in FY15
Exhibit 3: Revenue break-up of plastic segment

Consumer Composite
Products Cylinders &
Others
6%
7%
Construction
3%
Plastic segment
97%
Industrial
Products
15%
Plastic Piping
51%
Packaging
Products
21%
Exhibit 4: Comprehensive portfolio and target customer segment
Business verticals
Plastic piping system
Packaging products
Product Portfolio
uPVC pipes, injection moulded fittings, handmade fittings, polypropylene random,
copolymer pipes & fittings, HDPE pipe systems, CPVC pipes systems, inspection
chambers, water tanks, septic tanks, bath fittings, solvents
Specialty films, protective packaging products
Cross Laminated film products
Industrial components, material handling products (crates, pallets, bins & dustbins)
Industrial products
Consumer products
Composite products
Furniture
LPG cylinders
Target Customer segment

Potable water supply, irrigation, drainage &
sanitation, housing
Electronics, food industry, sports goods, insulation,
construction, agriculture, floriculture, horticulture,
grain storage, tarpaulin, pond lining
Auto sector, electronic household appliances,
Water Purification - filters, Soft Drink Companies,
Agriculture & Fisheries,
Household, office establishments, institutions
Retail/household
Page 2
Exhibit 5: Companys milestone

To upgrade technology, SIL enters into
collaboration agreement with Bdr. Schur
International, Denmark
Starts manufacturing of multilayer sheet

unit in Daman to serve automobile, air
conditioning and office equipment
segment. It also formed a JV with R
Raheja Investments to establish Supreme
Petrochem
Taparia family takes control of company through

outright purchase of shares
1942
Founded by Kantilal K Mody to

manufacture plastic moulded
products
1966
1985
Ties up with Manducher of France for upgradation of

auto components business and Schoeller
International of West Germany for its technology of
new generation bottle crates
1987
Start of new plant at Noida with a capacity

to manufacture 1500 tonnes of industrial
products
1989
1992
Supreme Petrochem signs MoU with Ultrabatch

of Italy, a leading manufacturer of high-end
additive masterbatches
1994-95
1998-03
Introduces new range of plumbing and fittings

products
2009
2014-15
Expanding footprints to eastern and southern

markets by establishing plastic piping plants
Enters flexible packaging division, Siltap

Chemicals Ltd merges with Supreme
Industries
Source: ICICIdirect.com Research
Exhibit 6: Manufacturing facilities spread across India
Supreme Industries manufacturing plants are located

across India. Multiple facilities help in reducing risk of
supply to its prominent dealers in case of any natural
calamity. Another significant reason for moving to other
geographies is to gain a competitive edge by strengthening
its distribution network coupled with various tax incentives
(under state rules/regulations)
Page 3
Investment Rationale
Growth in demand for processed plastic products in India
According to FICCI, the plastic processing industry is

expected to record volume CAGR of 10% to 18 MTPA in
FY13-18E while in value terms it is expected to record a
CAGR of 15% to | 137000 crore by the end of FY18E
The Indian plastic processing industry has grown at 15% CAGR in volume
terms from 6 MTPA in FY08 to 11 MTPA in FY13 while in value terms it
recorded 14% CAGR from | 46,585 crore to | 90,000 crore during the same
period. Consumption growth was largely driven by increasing usage of
plastics in various industries such as agriculture, packaging, automobiles,
electronics, telecom, healthcare, infrastructure, transportation and
consumer durables. In the last decade, several new applications of plastic
products such as use of thermoplastic in the automotive segment and use
of packaging products to safeguard the consumer durable items, helped in
boosting overall demand. According to Ficci, the plastic processing industry
is expected to record a volume CAGR of 14% to 18 MTPA from FY14-18E
while in value terms it is expected to record 15% CAGR to | 1,37,000 crore
by the end of FY18E.
20
18
16
14
12
10
8
6
4
2
0
CAGR 14%
CAGR 15%
11
Exhibit 8: Plastic processing industry growth trend

160,000
18
CAGR 15%
140,000
120,000
12.1
(| crore)
(MnTPA)
Exhibit 7: Demand of plastic products (in volume)
137,000
CAGR 14%
90,000
100,000
80,000
60,000
46,585
40,000
20,000
2008
2013
2014
2018
2008
2014
2018
Plastic processing industry: Huge growth potential
The domestic downstream industry comprises three broad

segments, injection moulding, blow moulding, extrusion
and
used
in
various
applications
like
packaging,
automobile, consumer durable, healthcare, etc
The plastic industry chain can be classified into two primary segments: 1)
Upstream that entails the manufacture of polymers and 2) downstream that
entails the conversion of polymers into plastic articles. The role of the
plastic industry (downstream) in the growth of Indian GDP is pivotal as it
caters to the entire spectrum of daily use items and covers every sphere of
life such as packaging, housing, construction, furniture, automobiles,
household items, agriculture, electronics, medical and electrical items. The
domestic downstream industry comprises three broad segments:
extrusion, injection moulding and blow moulding. The products that are
manufactured through these processes can be used in various applications
like packaging, automobile, consumer durable, healthcare, etc.
Exhibit 9: Plastic processing industry classification
Type of processing
Extrusion
Plastic products
Films & sheets, fibre and filaments pipes, conduits and profiles, miscellaneous applications
Injection moulding Industrial injection moulding, household injection moulding and thermo-ware/moulded luggage
Blow moulding
Bottles, containers, toys and housewares
Roto moulding
Large circular tanks such as water tanks
Extrusion moulding is the most commonly used plastic processing method.

Its products contribute ~60% to total consumption in India followed by
injection moulding plastics articles, which contribute ~25% to the total
consumption in India. It is a fast process and is used to produce large
numbers of identical items from high precision engineering components to
Page 4
disposable consumer goods. Products from other moulding processes

contribute the balance ~15% to total plastic consumption in India. Roto
moulding and blow moulding are the most commonly used processes after
extrusion and injection moulding. Roto moulding is a process used to
produce hollow plastic products. Typical products produced are manhole
inspection chambers, rainwater tanks, slides and climbing frames, diesel
fuel tanks, childrens playhouses, traffic cones and pellets. Blow moulding is
used for the production of hollow objects in large quantities. The main
applications are in bottles, jars and other containers.
Exhibit 10: Polymer consumption in India according to various process
Other Processes
8%
Roto Moulding
1%
Blow Moulding
6%
Over 30,000 units in the organised/unorganised sector are

engaged in plastic processing across the country. Almost
85% of the small & medium enterprises (SME) segment
employs over 4 million workers across the value chain
Injection
Moulding
25%
Extrusion
60%
Per capita consumption: India among lowest globally
109
(|/kg)
80
65
60
Lower per capita consumption

translates to huge opportunity
for plastic consumption
45
32
40
9.7
20
0
USA
Europe
China
India
Brazil
50
45
40
35
30
25
20
15
10
5
0
Use of plastic products in agriculture

and infrastructure is substantially
lower in India compared to global
average
43
35
25
21
17 16
15
18
8
2
Packaging
100
(%)
120
Exhibit 12: Utilisation of plastic products
Global
India
Agriculture
Exhibit 11: Per capital plastic product consumptions (kg/person)
Others
the US (~109 kg) and China (~45 kg)
In the last 10 years, the use of plastics has increased notably in various
industries due to its unique and diverse blending properties. Despite plastic
increasingly becoming a material of choice of widespread consumption, the
current per capita consumption in India (in kg/person) is still much below
(~9.7 kg) other nations like the US (~109 kg) and China (~45 kg). Keeping
the demographic scenario in mind, we believe there is enough scope for a
rise in plastic consumption in India.
Auto
kg/person) is still much below (~9.7 kg) other nations like
Infrastructure
Per capita consumption of plastic products in India (in
Source: FICCI, ICICIdirect.com Research, FY13 figures
Page 5
Application of plastic products in various industries
The total piping industry size in India is ~| 27,500 crore

largely dominated by the plastic piping industry, which is
considered to be ~| 21,500 crore while the metal piping
industry is at about | 6000 crore
Plastic piping industry: Structural reform to drive demand

The plastic piping industry (largely PVC) in India has been growing at a
CAGR of ~12-15% in the last five years. It is largely due to growth in
construction activities in tier-II and tier-III cities, replacement of
conventional piping systems like galvanised iron & cast iron piping systems
and increase in demand for branded agriculture & plumbing piping. The
piping industry consists of two segments viz. 1) plastic piping and 2) metal
piping. The size of the total piping industry in India is ~| 27,500 crore
largely dominated by the plastic piping industry, which is considered to be
~| 21,500 crore while the metal piping industry is about | 6000 crore. Since
replacement of metal by plastic has been happening rapidly, the plastic
industry is expected to grow at an accelerated pace in the coming years (we
believe at the same historical rate).
Exhibit 13: Structure of Indian piping industry
Domestic piping industry
Value: | 27500 crore
Plastic piping
Industry growth: CAGR 12-15%
Organised segment (65%-70%)

Metal piping
Value | 6000 crore
Unorganised segment (30-35%)

Value: | 7500 crore

Exhibit 14: PVC piping industry (with market share of listed players)
Growing brand and quality consciousness share of
PVC piping industry

Volume: ~17,00,000
organised players to rise further
Organised market
(60%)
~10,20,000 MT
Finolex Industries
Volume: 185706 MT
Supreme Industries
Volume: 204264 MT
Unorganised market
(40%)
~6,80,000 MT
Astral Poly
Volume 69919 MT
Jain Irrigation*
Volume: 240000 MT
Others
Volume: 172933 MT
Source: Company, ICICIdirect.com Research, market share by sales volume, includes CPVC pipe volumes also
Governments focus on increasing irrigation and housing
will help to keep the industry growth strong over the next
3-5 years
We believe, future demand for piping products would largely be driven by

various factors such as:
1. Governments flagship programme of Housing for all by 2022
According to Census 2011, India had a population of ~121 crore, out of
which ~38 crore (~31.2%) lived in urban areas. During 2001-11, the urban
population of India grew at a CAGR of 3.1%, resulting in an increase in the
level of urbanisation from 27.8% to 31.2%. This growing urbanisation has
led to problems of land shortage, housing shortfall and congested transit
and also severely stressed existing basic amenities such as water, power
and open spaces of the towns and cities. According to Census 2011,
Page 6
housing stock in urban India is ~7.8 crore for ~7.9 crore urban households.
Though the gap between household and housing stock is narrowing, the
actual shortage of homes is high as some portion of the current stock is
decrepit and people live in congested homes. Rising urbanisation has
resulted in people increasingly living in slums. Poor economic condition of
the weaker section of society has forced them to adjust to lack of amenities.
According to a government estimate, housing shortage in urban India was
18.8 million units in 2012 with ~75% of the estimated housing shortage
concentrated in 10 states (shown in Exhibit 15). Considering these factors,
currently there exists a wide gap between demand and supply of housing in
urban India. According to KPMG, a demographic trend suggests India is on
the verge of large scale urbanisation over the next few decades. With more
than 1 crore people getting added to urban areas, Indias urban population
is expected to reach about 81 crore by 2050.
Exhibit 15: Technical Group estimates show housing shortage of 18.78

million in 2012
Exhibit 16: Increment in housing stocks

30
UP, 3.07
Maharashtra,
1.94
Gujarat, 0.99
MP, 1.1
Rajasthan, 1.15
20
15
10
0
1991
AP, 1.27
Bihar, 1.19
19.2 18.7
15.1 14.7
West Bengal,
1.33
Karnataka, 1.02
24.7 24.5
25
( crore)
Rest of
states/Uts,
4.47
Tamilnadu, 1.25
2001
Households
2011
Housing Stocks
Source: Census 2011, NHB, ICICIdirect.com Research

Source: Census 2011, ICICIdirect.com Research
As per KPMG estimate, the vision would require

development of ~11 crore houses with investment of over
US$ 2 trillion (or about US$ 250 to 260 billion annual
investment until 2022)
To bridge the demand supply gap and acknowledge the importance of

housing issue in the country, the government has launched a massive
campaign of Housing for All by 2022. As per KPMG estimates, the vision
would require development of ~11 crore houses and outlay of over US$2
trillion (or about US$250-260 billion annual investment until 2022). Most
housing development would be expected for the economically weak
section/low income group households (in both rural and urban areas)
whose income is less than | 2 lakh per annum.
Exhibit 17: Number of housing units required under Housing for all by 2022 programme
Particulars
Current housing shortage
Urban (crore unit)
Rural (crore unit)
Total (crore unit)
1.9
5.9
Required housing units by 2022
2.6-2.9
2.3-2.5
4.9-5.4
Total Need
4.4-4.8
6.3-6.5
10.7-11.3
Source: KPMG, ICICIdirect.com Research
We believe housing shortage coupled with lack of proper water

management system (sewage/drainage) in slums creates ample opportunity
for the piping industry in India. The major application of PVC pipes is in
water management for the housing and agriculture sectors. Since SIL earns
nearly 65% of its piping revenue from the housing segment, we believe the
company would be a direct beneficiary of various government initiatives
such as Housing for All by 2022, 100 smart cities, etc. where PVC pipes &
fittings are used for supply of water in households, removal of waste water,
linking of drainage systems, pipes for micro irrigations, etc.
Page 7
According to Census 2011, over 67% of rural households in

India lack access to toilets. In other words, more than 11
crore rural households do not have access to a toilet
2. Swachh Bharat Mission: Boost for plastic products

Swachh Bharat Mission (SBM) is another flagship programme of the
government aimed to stop open defecation through construction of
individual household latrines (IHHL), cluster toilets and community toilets
(especially via PPP mode). Solid and liquid waste management is also an
important component of the programme. According to Census 2011, over
67% of rural households in India lack access to toilets. In other words, more
than 11 crore rural households do not have access to a toilet.
The government has also allocated total | 1,96,000 crore to SBM with
| 1,34,000 crore coming from the Ministry of Drinking Water & Sanitation
and the rest from the Urban Development Ministry. Under the scheme, total
2,47,000 gram Panchayats of India will be provided | 20 lakh each to spend
on sanitation. We believe lack of sanitation and drinking water facility at
~13 crore households creates a huge opportunity for PVC pipe
manufacturers like Supreme Industries, Astral Poly, Ashirvad and Finolex
Pipes.
Exhibit 18: Households without sanitation and drinking water facility (in crore)
Total Households
25
Households sources water outside the premises
13
Households have to fetch water from a source located within 500 m in rural areas/100 m in urban areas
Fetch drinking water from a source located more than 500 m away in rural areas or 100 m in urban areas
12
Household without toilets (rural + urban)
12
Exhibit 19: Number of toilets constructed each year for individual rural households
1113
1200
1000
~13 crore households creates a huge opportunity for PVC

pipe manufacturers like Supreme industries, Astral Poly,
Ashirvad and Finolex Pipes
800
(Lakhs)
We believe lack of sanitation and drinking water facility at
600
400
200
88.0
45.6
49.8
40.1
57.2
2011-12
2012-13
2013-14
2014-15*
4 yr avg
0
Target by 2019
Households have no drainage facility (rural + urban)
Page 8
AMRUT can be considered a remodelled version of

JNNURM wherein the government has worked on many
flaws present in the earlier programme
An estimate of the funds required over a 20 year period (at

2009-10 prices), was made by the High Powered Expert
Committee during 2011
3. AMRUT: Targets 500 cities to raise water supply, sewerage, urban transport system
The government has also launched its programme Atal Mission for
Rejuvenation and Urban Transformation (AMRUT) to provide basic services
to household and build amenities in cities. The purpose of AMRUT is to:
1. Ensure that every household has access to a tap with assured supply of
water and sewerage connections.
2. Increase the amenity value of cities by developing greenery and well
maintained open spaces (e.g. parks).
3. Reduce pollution by switching to public transport or constructing facilities
for non motorised transport (e.g. walking and cycling).
Under the scheme, ~500 cities and towns have been selected on the basis
of population i.e. one lakh and above. The project would help improve
existing basic infrastructure services like extending clean drinking water
supply, improve sewerage networks, develop seepage management, lay
storm water drains, improve public transport services and create green
public spaces like parks, etc. The High Powered Expert Committee has
estimated that | 39.2 lakh crore is required for creation of urban
infrastructure, including | 17.3 lakh crore for urban roads and | 8 lakh crore
for services, such as water supply, sewerage, solid waste management and
storm water drains. Moreover, the requirement for Operation and
Maintenance (O&M) was separately estimated to be | 19.9 lakh crore.
AMRUT, a flagship programme to improve the infrastructure of the country
would be the future growth driver of the plastic piping industry.
4. Plasticulture: Rising trend of plastic uses in agriculture
Agriculture contributes nearly ~14% to GDP and provides employment to
~58% of the Indian population. Plasticulture refers to use of plastics in
agriculture and horticulture. Indian agriculture has witnessed various
changes in the form of mechanised farming to improve yield of the crop.
Use of plastic products not only helps reduce infrastructure cost but
improves both quality and quantity of crops. The application of plastic
products in agriculture substantially reduces costs and increases water
saving and water use efficiency. Therefore, it can lead to high productivity
of crops. According to Ficci, each application can save water by 30-100%.
In case of farm ponds lined with plastic film, the total loss by seepage of
water can be minimised to zero.
Exhibit 20: Major use of plastics in agriculture
Application
Comments
Ponds and reservoirs linings greenhouse have precise application of irrigation water
and plant nutrients at low pressure and at frequent intervals through drippers/emitters
Drip irrigation system
directly into the root zone of the plant
-Application of water under high pressure with the help of a pump.
Sprinkle irrigation
-Water is released through a small diameter nozzle placed in pipes
system
-Plastics film lining to prevent seepage in canals, ponds and reservoirs
Ponds & reservoir linings -Also avoids depletion of stored water used for drinking & irrigation purpose
-Greenhouse is a framed structure covered with glass or plastics film
-Acts as selective radiation filter, in which plants are grown under the controlled
environment
Greenhouse
Source: FICCI, ICICIdirect.com Research
Exhibit 21: Benefits from Plasticulture applications
Plasticulture refers to use of plastics in agriculture and
Drip irrigation
40-70
30-70
horticulture. Plasticulture applications are: drip irrigation,
Sprinkler irrigation
30-50
35-60
ponds & reservoirs with plastic films, greenhouses, plastic
Greenhouse
60-85
20-25
crates, bins, boxes, etc
Farm pond lined with plastic film
100
40-60
Application
Water saving (%)
Water use Efficiency (%)
Source: FICCI, ICICIdirect.com Research
Page 9
The domestic micro irrigation system industry has grown

at a CAGR of 15% in FY09-14 and is expected to grow at a
CAGR of 20%, going forward, in FY14-17E
Rising trend of micro irrigation system (MIS)

The current domestic industry size of MIS is pegged at ~| 4000 crore
(FY14) with penetration at a mere ~9% [6 million hectares (MH) out of the
net irrigated area of ~70 MH]. In India, it is more prevalent in Maharashtra,
Gujarat, Rajasthan, Tamil Nadu, and Andhra Pradesh among others. The
domestic industry has grown at a CAGR of 15% in FY09-14. It is expected to
grow at a CAGR of ~15%, going forward, in FY14-17. The payback period
for farmers domestically is in the range of one or two years. The below
table discusses penetration (in 2011) of MIS in India vis--vis other
countries. To boost the use of MIS, a wide array of incentives is being
provided by central & state governments towards its implementation. The
Central government, in the past, has been promoting MIS through its
flagship programme National Mission on Micro Irrigation (NMMI) with
budget outlay become ~3x in the last five years to ~| 1100 crore in FY15.
Exhibit 22: Low penetration of MIS creates huge scope for increasing its penetration in India
Total Irrigated Area
(MH)
Country
To boost the use of MIS, a wide array of incentives is being

provided by central & state governments towards its
implementation
USA
India
China
Brazil
Sprinkler Irrigation
Drip Irrigation (MH) Total MIS (MH)
(MH)
24.7
60.9
59.3
5.8
12.4
3.0
2.9
3.9
1.6
1.9
1.7
0.6
MIS Penetration
14.0
4.9
4.6
4.5
56.6%
8.1%
7.8%
77.6%
Source: International commission on irrigation & drainage, ICICIdirect.com Research
Actual Expenditure
1121
715
1342
1271
1203
1150
1227
1500
1800
Budget Outlay
1000
972
2000
1800
1600
1400
1200
1000
800
600
400
200
0
430
480
(| crore)
Exhibit 23: Government outlay to support MIS
FY10
FY11
FY12
FY13
FY14
FY15E
FY16E
Source: Ministry of agriculture,* data as on Nov14, ICICIdirect.com Research, ICICIdirect.com Research
Plastic piping segment: Sales to record ~16% CAGR in FY15-18E
The plastic piping capacity of SIL is expected to increase at

a CAGR of 10% in FY15-18E. This would help in sales
volume CAGR of 15%
While the piping industry has been growing at 12-15% CAGR in the last 10
years, SILs piping revenue recorded a CAGR of 30% during the same
period largely driven by the construction sector and replacement demand.
Further, we have modelled revenue CAGR of ~16% in FY15-18E for the
piping division, led by ~15% volume growth. Plastic piping capacity is
expected to increase at 10% CAGR in the same period. To summarise, the
demand for plastic pipes would largely be driven by:
1. Replacement of conventional piping systems like galvanised iron
and cast iron piping systems with plastic is ongoing and will
continue in the near term
2. Growth in construction, mainly in rural & Tier-II and III cities is going
to be supported by demographic change, aspirations of better
lifestyle, nuclear family concept & continuous rise of middle class
3. Increase in demand for branded agriculture and plumbing pipes
because of increase in income levels
4. The company has introduced a silent pipe system made of PVC for
the first time in the country. This is mainly used in high rise
buildings, hospitals and high quality hotels.
Page 10
Safety measures to drive packaging revenue at ~13% CAGR in FY15-18E

The Indian packaging industry is pegged at US$33.8 billion (rigid packaging
US$26.7 billion, flexible packaging US$7.1 billion) at a CAGR of 13-15%.
Processed food packaging with ~48% market share in the overall
packaging industry dominates the other three segments i.e. personal care
packaging with ~27% market share, pharmaceutical 6% market share and
others 19% market share. Plastics are preferred for their ability to pack the
processed food. Government data showed the size of the Indian food
processing industry is ~US$83 billion and has grown at 8.4% CAGR in the
last five years. The growth of the food processing industry is a blend of
increasing urbanisation, young population and income level. According to
Ficci, the industry is expected to continue to record 8% CAGR for FY15-18E.
Exhibit 24: Tarpaulin used to cover food grains
On the other hand, under the protecting packaging industry, SIL products
protect food items in grain storage and pond lining. Tarpaulin is used to
cover products, thereby protecting them from moisture and dust. It can be
used as a protective covering in sectors like agriculture, infrastructure,
automobiles and also as tents, floor spreads, as a cover for machinery, etc.
Under agriculture, tarpaulin is used to cover food grains. According to FCI,
over 1.94 lakh metric tonnes of food grains were wasted in India due to lack
of proper infrastructure to safeguard foods between 2005 and 2013.
Exhibit 25: Food grains waste
100000
95075
(MT)
80000
60000
40000
25353
20000
20114
4426
3148
0
2005-06
2006-07
2007-08
2008-09
2012-13
Damaged stocks
Source: Businessline, ICICIdirect.com Research
Source: FCI, ICICIdirect.com Research
SILs protective packaging products are used in sports goods, electronics,

white goods, textiles, healthcare, toys, etc. The large and growing Indian
middle class, along with growing organised retailing in India are fuelling
growth in the packaging industry. Another factor that has provided
substantial stimulus to the packaging machinery industry is the rapid
growth of exports, which needs superior packaging standards for the
international market.
In the packaging segment, we have modelled ~13% revenue CAGR in
FY15-18E led by 12.6% volume growth, on the back of good traction of
demand from agriculture, construction and white goods segments. The
company introduced premium brand Silpaulin (cross laminated films
products), which contributes ~49% to packaging products sales. The
product is considered to be a value-added product wherein the product
margin is above ~17%. In the last three years, cross laminated film
products sales have recorded ~11% CAGR led by ~6% price hike. SIL is
focused on increasing the proportion of higher margin product (by
expanding its distribution network) to sales to improve its overall EBITDA
margin.
Page 11
Exhibit 26: Protective packaging products, industry size and application of products
Products
EPE foam
Air bubble film
Estimated market
size (| crore)
600
350
Market share (%)
34%
15%
Cross linked foam (block)
330
22%
Cross linked foam rolls

(chemical)
90
56%
Nitrile PVC rubber foam
95
7%
Application
1. Packaging of electronic goods, ceramics,
handicraft and glassware
2. Foam sheets are widely used for insulation of air
conditioners, industrial chillers, cold water pipes, air
handling units, industrial refrigerators
3. Used in automobiles for cabin insulations, door
panels, seat linings, engines, bonnets
4. Used in fabrication of gymnastics and exercise
mats, leg guards, arm elbow/shoulder pads, helmets
1. Packaging of fragile items like crockery

2. Packaging of electronic items and protection of
screens
3. Precious antiques packaging
4. Vital packaging in pharmaceutical industry
1. Medical device packaging

2. Military grade tool control
3. Orthopaedic soft goods
4. Athletic padding/helmet lining
5. Protective case inserts
Used largely for commerical purpose like thermal

insulation, construction expansion joints, industrial
gaskets, etc
1. Ideal sealing material against gas or liquid

2. Excellent shock and impact absorbing
characteristics uses in gym and athletic equipment
Page 12
Industrial products: Growth likely with rising demand for consumer goods
SILs industrial products segment contributes nearly 15% (| 649 crore) to
the topline. It has a total capacity of 54,700 MTPA by the end of FY15. The
companys industrial product segment can largely be segregated into two
segments 1) industrial components and 2) material handling products.
During FY15, revenue of industrial components recorded

abysmal growth of 3% YoY led by 11% YoY growth in
revenue of products sold to the electronics and appliances
industry.
The company has further added a new MNC client, Bosch

to its marquee client portfolio in FY15 for supply of plastic
body of its various appliances
Material handling is highly competitive as a majority of the

players in this segment are unorganised. Organised players
other than SIL present in this segment include Nilkamal,
Wimplast and Time Technoplast
Industrial components: revival in CD demand and automobile to drive volume growth

The company is a prime supplier of plastic parts and assemblies to various
consumer durable (CD) and automobile Industry players. In the CD
category, it supplies the plastic body of washing machines, ACs,
refrigerators, water purifiers and coolers coupled with various other
customised solutions like the body of ATMs, electronic voting machines,
etc. In the automobile segment, the company supplies various solutions for
dashboard, bumpers, fuel system, seating lines, storage battery, etc. As
revenues of these segments are dependent on CD and automobile industry
performance, lower volume growth in these segments in FY11-15 adversely
impacted the performance of the industrial component segment of SIL.
During FY15, revenues of industrial components recorded abysmal growth
of 3% YoY led by 11% YoY growth in revenue of products sold to the
electronics and appliances industry. However, sales from the automotive
segment declined 4% YoY. Going forward, we believe the company will
benefit from a revival in CD demand (expected volume CAGR in the range
of 7-14% for FY15-18E) and automotive segment (volume CAGR of ~15%
in FY15-18E). SIL has further added a new MNC client, Bosch to its marquee
client portfolio in FY15 for the supply of plastic body of its various
appliances. Bosch is expanding it appliances production capacity and is
expected to launch new products in near future. Also, the company has
also started manufacture of air coolers in Noida for its reputed client.
Material handling products: Marquee clients in portfolio
In the material handling segment, the company is one of the largest
suppliers to the soft drink industry to the likes of Coca Cola and Pepsi. SIL
also supplies pellets and bins to various storage companies, the fisheries
industry and government organisations. The segment is highly competitive
as majority of the players in this segment are unorganised. Organised
players other than SIL present in this segment include Nilkamal, Wimplast
and Time Technoplast. The segment recorded value growth of ~23% YoY
in FY15, led by volume growth of ~12% YoY. Going forward, we believe
the companys growth will be driven by sustained demand from the soft
drink industry as well as expansion of the distributor network in future. SIL
has increased the number of its channel partners from 192 to 202 in FY15.
The company plans to further increase the number in the coming future.
We also believe that being an industrial category product where the
customer has substantial bargaining power, the EBITDA margin in this
segment may remain at ~ 12% (same as recorded in FY15).
We have modelled revenue CAGR of ~11% in the overall industrial
products segments (both industrial, material handling products) led by
volume CAGR of ~10% for FY15-18E on the back of a revival in demand in
the CD and automobile segments. Demand for this category of products
has remained muted in the last three years. Hence, the company has
refrained from any major capex in the segment. SIL has taken a cautious
approach towards increasing the capacity of this division. However, the
company has largely focused on increasing the quality of the product and
launching premium products in this category.
Page 13
Exhibit 27: Plastic used in various consumer durable, automotive components and material handling products
Consumer durable product categories
Automotive components and

electronics voting machines
Material handling and storage

products
Exhibit 28: Supreme industrial segment

Segment
Industry
Automobile
Industrial products
Consumer Durable
Material Handling
products
Storage & Packaging
Products
Moulded parts such as
dashboards, seating line,
bumpers for automobile
interiors and exteriors
Plastic body of Washing
Machine, AC, Water
purifier etc
Major Clients
Maruti Suzuki, Tata Motors, Honda,
Mahindra & Mahindra, Piaggio
Pallets, crates and bins
Coca Cola India, Hindustan Unilever

Ltd, Pepsico India, Reliance Retail
Whirlpool India Ltd, Hitachi India Pvt. Ltd

Samsung India, Bosch, Tata Chemicals
Exhibit 29: Consumer durable and automobile volume growth (volume in million units)
Products/Year
FY11
FY13
FY15E
FY16E
FY18E
CAGR 2011-15
CAGR 2015-18E
Washing Machines
3.8
4.2
4.7
5.1
6.1
7.3
9.1
Room AC
3.2
3.0
3.1
3.3
3.8
-0.5
6.6
Refrigerator
8.2
9.4
10.3
11.5
15.1
7.9
13.6
Automobile
3.0
3.2
3.2
3.4
4.0
2.5
7.7
Source: Crisil, ICICIdirect.com Research
Page 14
Consumer products: Change in strategy to drive segment profit

Supreme is one of the well known players in the plastic furniture industry
with 10% market share (in value terms) behind Nilkamal (with ~53% market
share) and Wimplast (with ~13% market share). The estimated market size
of the plastic furniture industry is ~| 2900 crore. The company is present in
economic (plastic chairs, stools) as well as premium (sofa set, table, office
furniture, and premium chairs) segments.
Currently, SIL manufactures plastic furniture at five different locations. In
the last three years, the segment revenue growth remained muted mainly
due to the companys strategy to exit the commodity business and focus
more on premium products. This is clearly evident from an increase in
proportion of premium products from 38.4% in FY13 to 47.6% in FY15.
However, YoY, there was a marginal decline in proportion of premium
products by ~90 bps YoY mainly due to a delay in launch of premium
products in the key markets. It is further commencing a greenfield project to
manufacture new category of furniture products at Kharagpur at an
investment of | 30 crore, which will start production by Jan2016.
262.0
268.0
276.0
259.0
300.7
276.3
Exhibit 31: Market share of consumer plastic segments

Others
20%
336.8
197.9
Prima Plastic
4%
Source: Company, ICICIdirect.com Research * 9MFY16E
FY18E
FY17E
FY16E*
FY15
FY14
FY13
Supreme Ind
10%
FY12
400
350
300
250
200
150
100
50
0
FY11
(| crore)
Exhibit 30: Focus more on premium products took toll on revenue growth
Nilkamal
53%
Wimplast
13%
Seventh Pay Commission: To drive premium product sales, going forward
Supreme plans to increase the contribution of premium

furniture to 65% of segment revenues by the end of FY19E
We believe SIL would benefit from implementation of the Seventh Pay

Commission wherein the government is expected to hike the pay of ~1.4
crore government employees by ~23.5% (as per Pay Commission
recommendation). Post the wage hike, the consumption pattern is likely to
shift towards the premium product category. This coupled with rising
urbanisation and continuous demand from tier II and tier III cities would
help drive the sale of furniture in the near future. SIL plans to continue to
increase the proportion of premium furniture in the consumer products
category. The company has launched a new range of premium products for
exports in coming years. SIL plans to increase the contribution of premium
furniture to 65% of segment revenues by the end of FY19E.
In FY15, SIL exported its premium range of furniture to South Korea. The
company is further expected to add more countries to its kitty in the coming
years. We have modelled moderate revenue CAGR of ~9% for FY15-18E
(vs. ~1% CAGR in FY11-15) in the consumer product segment supported
by capacity addition in the furniture segment (upcoming plant in south
India. The strategy is to focus on the premium product category and
increase the number of exporting destinations.
Page 15
Composite products: Strong product pipeline

Composite materials typically offer enhanced strength or
durability over many other products and may provide
additional benefits like resistance to moisture or corrosion.
Under the composite products category, the company
largely manufactures composite LPG cylinder and pellets
The company entered the composite products category in FY12 citing

immense growth potential. Composite materials include any products made
from a blend of two or more base materials. These typically offer enhanced
strength or durability over many other products and may provide additional
benefits like resistance to moisture or corrosion. Under the composite
products category, SIL largely manufactures composite LPG cylinder and
pellets. The company has installed capacity for composite pipes. However,
plants are not yet operational. SIL blends various materials to manufacture
fibre glass, which is used to manufacture LPG cylinders.
Composite LPG cylinder: Ready to use capacity, waiting for government approval
Consumption of fibreglass products in India is around 1.2

lakh tonnes per annum compared to consumption in China
of over 1 million tonnes. With excellent properties of
fibreglass and varied application opportunities available,
we expect healthy growth in composite products business
SIL has incurred an expense of | 70 crore to set up a

greenfield capacity to manufacture LPG composite
cylinders with an installed capacity of 500,000 cylinders
per annum at Halol (Gujarat) with six variants of capacity
ranging from 5 kg to 14 kg
Currently, there are 16.4 crore LPG consumers in India who use steel made
LPG cylinders. Steel cylinders have two major drawbacks: 1) Issue of
leakage, which may lead to blast in the cylinder and 2) Checking of quantity
to avoid theft. The new composite cylinder has been launched to address
these two basic problems. However, cylinders are expensive compared to
steel cylinders (| 2500-3000 almost double the regular steel cylinder, for
which LPG distributors charge | 1,400 as security deposit). However, they
are safer and accident free as they do not explode unlike steel cylinders. As
the cylinders are translucent, the level of gas can also be seen, which will
be an added advantage for consumers. Empty cylinders weigh half as much
as present steel cylinders so they are easy to carry and also aesthetically
better looking. SIL has incurred an expense of | 70 crore to set up a
greenfield capacity to manufacture LPG composite cylinders with an
installed capacity of 500,000 cylinders per annum at Halol (Gujarat) with six
variants of capacity ranging from 5 kg to 14 kg.
India is the largest market for LPG cylinders. Oil companies have
recognised the use of composite cylinders despite higher cost. Oil
marketing companies are expected to float a tender for an education order
in two sizes, 12.5 lakh and 24 lakh. Considering the higher deposit amount,
the government is mulling launching these products for urban consumers
first. Since the use of composite cylinder in India is still not permitted, the
company is using its capacity for the export market. In FY15, SIL had
exported the first lot of composite cylinders of 33.3 lakh to South Korea.
The company is in further discussions with many countries for this product
and hopes to finalise business. We expect utilisation rates of this product to
pick up gradually and be a major revenue driver once the Government of
India permits sale of this product in the Indian market.
Exhibit 32: Composite LPG cylinders
Composite LPG cylinders
Advantage over steel cylinders
Disadvantage
Light weight & ergonomic:

Cylinders are designed for easy handling and are 1/3rd lighter
then traditional metal cylinder
Transparent:
cylinders that will make it almost impossible for vendors to
deliver lower-than-promised quantity
Explosion proof:
100% explosion proof. Withstands three times higher pressure
than traditional ones
Non-corrosive:
It does not corrode or have rust marks like steel cylinders
A transparent cylinder is likely to cost | 2,5003,000, almost double the regular steel
cylinder, for which LPG distributors charge |
1,400 as security deposit
Eco-friendly:
Majority of materials used are recyclable
Page 16
Composite pipe: Production remains stalled
The plant in Halol, Gujarat was completed (same campus

where cylinders are being manufactured) in FY13 at an
investment of ~ | 16 crore to produce ~15000 pipes per
annum
The company planned to start production of composite pipes in

collaboration (technical tie-up) with Japans NBL. The corporation has
patented the technology and process to manufacture high pressure
composite pipes. These composite pipes are very suitable for down hole
and casing pipes for the oil & gas industry. These are much lighter
compared to present special steel pipes in use. They are anti-corrosive,
which is very much desirable for these applications. The company
completed the plant in Halol, Gujarat (same campus where cylinders are
being manufactured) in FY13 at an investment of ~ | 16 crore to produce
~15000 pipes per annum. However, it encountered some technical
problems during the trial run, which led to some difference of opinion with
its technology provider NBL Corporation of Japan. The issue has remained
unsolved. The production capacity has remained idle since its
commencement.
Multiple manufacturing plants help reduce geographical

concentration and serve dealer network effectively
Exhibit 33: Plant location across region
Currently, SIL operates 25 plants across India. The

manufacturing base at different locations reduces its
geographic concentration risk. It also helps the company to
expand its dealer network to new geographies

Malanpur Unit III and Kharagpur unit are under construction
and are likely to commence operations during Q2FY16
SIL is a well-diversified plastic processing company with a de-risked

manufacturing base in India. The modern manufacturing process (more
than 25 plants spread across regions in India) and highly scalable business
model enable the company to quickly respond to changing trends of plastic
demand. With south and east India fast emerging as the new plastic
manufacturing hub of India, the proposed capacity expansion (for
Page 17
manufacturing plastic piping system in Assam and plastic piping, protective

packaging & furniture products in south India) is expected to help SIL to
reduce its geographic concentration risk by diversifying operations across
India. In addition, having multiple facilities helps reduce risk of supply to its
prominent dealers in case of any natural calamities. Another significant
factor behind moving to other geographies is to gain a competitive edge by
strengthening distribution networks coupled with various tax incentives
(under state rules/regulations).
Supreme has a total dealer network of ~2469 spread

across India. The company is further planning to expand its
dealer network with the addition of new capacity
Further, with continuous investments in increasing capacity, a

strengthening dealer network and maintaining high product quality SIL has
been able to maintain its position as one of the largest players in the PVC
pipe industries. Further, the company is better placed than (or at least at par
with) its competitors in terms of having a 2469-strong dealer network
across India. We believe continuous capacity expansion along with regular
addition to the dealer network would result in overall volume CAGR of
~12% for FY15-18E against ~8% during FY11-15.
Exhibit 34: Strong dealer network spread across regions
Company
Distribution Networks
Supreme Industries
2469
Astral Poly technik Ltd
1700
Ashirvad Pipes
1800
Jain Irrigation
3071
Finolex Industries
600
Source: Company, ICICIdirect.com Research,
Regular capacity addition to drive topline
In the last five years, the company has incurred a capex of

over | 1000 crore and expanded capacity from 3.3 lakh
tonnes to 4.5 lakh tonnes
Backed by strong volume growth over the last five years coupled with its
strategy to spread wings across India, the company incurred a capex of
over | 1000 crore to increase capacity from 3.3 lakh tonnes to 4.5 lakh
tonnes in FY15. Considering better volume growth, going forward, SIL is
further planning an aggressive expansion of | 1500 crore across business
segments over the next five years. This would increase its capacity to over
6.5 lakh tonnes by FY20. This would be a combination of greenfield as well
as brownfield projects. As far as greenfield expansion is concerned, the
company would be adding a few more locations by FY20. This would take
the number of facilities to 28 from the existing 25.
Exhibit 35: Upcoming facility
Division
Proposed location for 2015-16 to 2017-18
Plastic Piping System
Rajasthan
Plastic Piping System
Assam
Plastic Piping System, Protective packaging Products & Furniture
Southern India
During FY16 (9MFY16), SIL is envisaging a capex of about | 200 crore to be

funded through accruals and suppliers credit on the following segments:
1. Ongoing work of setting up a plastic products complex in
Kharagpur (West Bengal) and Roto moulded products unit at
Malanpur (MP)
2. Expansion of capacities of bath fitting products
3. Introduction of several varieties of moulded fittings at Jalgaon &
Malanpur plants
4. To introduce large range of premium furniture products in all its
manufacturing plants
5. To put up Roto moulding capacity at Kanpur (UP) and Kharagpur
(West Bengal) plants
6. To install polyethylene and PVC pipes capacity for sewerage and
drainage applications
Page 18
7. To construct new building and install special machines for making

varieties of cross laminate film made up products at its Gate Muvala
(Gujarat) plant
8. To increase the capacity and range of pellets in material handling
products division
9. To increase production capacity of protective packaging products at
various locations and invest in a new location
10. To invest in balancing equipment and automation at all its plants as
may be required
Focus to enhance share of value-added products in total sales

SIL is taking concrete steps to increase the share of value-added products
to its total sales to 35% by FY20 from 31.7% in FY13 by launching products
in niche categories. As a part of its renewed strategy to launch niche
products, the company has added high-rise low-noise SWR systems
(required in high rise buildings, hospital and high quality hotels), plastic
faucets, CPVC fire sprinkler pipes, and new product verticals within the
cross-laminated division like 35 gsm Silpaulin, LPG composite cylinders,
composite pipes and bathroom fittings. In the furniture business, the
company adopted a strategy to focus more on premium category products.
This resulted in short-term hiccups for the furniture segment wherein
volumes recorded a continuous decline between FY11 and FY15. Further,
SIL plans to increase the share of value-added products under the furniture
segment to 65% from the current 48%. To achieve this goal, the company
has put up a greenfield project in Kharagpur at an investment of | 30 crore.
Considering the superiority of the products, SIL also plans to start export of
these products in a big way.
Exhibit 36: Increasing share of value-added products
SIL is taking concrete steps to increase the share of value
Plastic Piping
Moulded furniture
Cross lami. films
Prot Packaging
Composite LPG Cyl
Others
Total
FY13
FY14
FY15
27.3%
38.4%
100.0%
35.4%
31.7%
27.7%
48.6%
100.0%
31.7%
1.61%
32.3%
30.3%
47.6%
100.0%
30.4%
100%
2.51%
34.2%
Estimated share in
2019-20
30.0%
65.0%
100.0%
45.0%
100%
+35%
added products to its total sales to +35% from current

34% by 2019-20
Apart from rising concentration of value-added products to sales, the

company also believes in continuous innovations and launching of new
products in almost every business segment. Some examples are as
follows:
1. Only Indian company to have the technology to manufacture
patented cross laminated film products under brand name Silpaulin.
It is 100% water-proof and weather resistant (UV stabilised) besides,
being tough, light weight, rot proof and having heat sealed joints
2. The company introduced silent pipe system made from PVC for the
first time in the country
3. Launching the composite LPG cylinder in the Indian market on a
trial basis after the government
4. The company introduced 72 injection moulded pipe fittings during
FY15 and total 387 new products to the range of various plastic
piping systems. With this, the total product portfolio in this segment
has now reached 6500 from 6113 in FY14
Page 19
Tie-ups with experts to improve quality of the products

Supreme Industries being a market leader is concerned about the relevance
and quality of the products. In order to provide a better experience and
quality products to end users, the company has entered into technical tieups with various multinational companies across the world. The technical
collaboration has helped SIL improve the quality (by adopting new
technology) thereby producing international standard products at minimal
operating costs. This has also helped the company to create strong brand
value of its products and helped increase the contribution of value added
products in total sales.
To provide a better experience and quality products to end
users, the company has entered into technical tie-ups with
various multinational companies across the world
Exhibit 37: Technical collaboration with various MNC to drive expertise

Company
Country
Product Line
Rasmussen Polymer Development
Switzerland
Cross-laminated Films
Wavin
Netherlands
Plastic Piping Systems
Foam Partner
Switzerland
Reticulated PU Foam
Sanwa Kako
Japan
2 stage Foam
PE Tech
Korea
Cross Linked Foam
Kumi Kasai Co. Ltd
Japan
Automotive Components
Germany
Composite LPG Cylinders
Spears Mfg. Co
Los Angeles
Fire Sprinkler Pipes from CPVC
Calcamite Sanitary Services
South Africa
Septic Tanks
Kautex GMBH
Real estate monetisation to be one time event
The management expects another | 125 crore from the

sale of the remaining portion available for sale, even higher
realisation than previously considering limited availability
of good office premises in the vicinity of the companys
premise
As a part of companys strategy to unlock the value of land located in the

prime location of Andheri (West) Mumbai, SIL has developed a commercial
real estate project with the help of the R Raheja Group. The company has
developed ground plus 10 storied state-of-the-art commercial complexes
called Supreme Chambers. The complex has a total saleable area of
2,82,835 sq ft. Of this, the company has already sold about 2,12,286 sq ft.
raising ~| 338.6 crore. The complex has modern facilities like health club,
conference room, parking for 350+ cars, etc. with green building rating
from the US Green Building Council (USGBC).
The management plans to sell the entire complex excluding about 6681 sq
ft (kept for self use). The management expects another | 125 crore from the
sale of remaining portion available for sale, even higher realisation than
previously considering limited availability of good office premises in the
vicinity of the companys premise. The total cost of the project is ~| 145
crore. Cash flow from monetisation will be funding capex and reduce debt
on the balance sheet. We have factored in an inflow of | 107 crore from the
sale of property (on a conservative basis and below management
expectation) on our assumption, considering the major inflow had
happened in FY17E.
Page 20
Supreme Petrochem: Strategic investment

Supreme Petrochem is an associate company wherein Supreme Industries
and the R Raheja Group own 29.99% each in the company. The company is
mainly into four products: 1) Polystyrene, 2) Expandable Polystyrene, 3)
Speciality Polymers and Compounds Business and 4) Extruded Polystyrene
Insulation Board (XPS). Supreme Petrochem operates a modern
polystyrene facility with an installed capacity of 2,85,000 tonnes per annum
(Polystyrene and compounded polymers) at Raigad (Maharashtra) and
Chennai (Tamil Nadu). Polystyrene is a thermoplastic resin being applied in
television cabinets, car components, novelty items, food packaging,
computers, air-conditioners and washing machines, beads, bangles, etc.
The company also has an Expandable Polystyrene (EPS) capacity of
~65,000 tonnes per annum technical collaboration with Nova Inc US with a
buyback arrangement of EPS cup grade production. The company accounts
for 2% of global capacity and 60% of domestic installed capacity.
Supreme Petrochem is an associate company wherein

Supreme Industries and the R Raheja Group own 29.99%
each in the company
In the last five years, annual sales of the company recorded moderate
CAGR of 8%, due to a decline in volume of Polystyrene. The company is
expected to restrict investment in the four verticals of Supreme Petrochem
as SIL has built adequate capacity to deal with future demand. With the
recovery in demand of polystyrene, low level of capex and almost debt free
status of the company we believe Supreme Petrochem would remain a
positive contributor to the PAT of Supreme Industries, going forward.
2967.16
1943.7
3264.3
2652.54
2272.67
10.0
100
8.0
80
6.0
60
4.0
FY11
FY12
FY13
Net sales
FY14
FY15
(| crore)
3500
3000
2500
2000
1500
1000
500
0
Exhibit 39: EBITDA margin movement hits PAT
(%)
(| crore)
Exhibit 38: Volatility in sales led by volume
87.7
73.5
33.4
40
2.0
20
0.0
0
FY11
FY12
EBITDA Margin
30.6
FY13
FY14
35.7
FY15
PAT
Page 21
Key Financials
Sales CAGR of ~12% backed by expansion plan
During the last five years, SIL recorded sales CAGR of 14.7% driven by
volume CAGR of 8%. The volume growth was largely driven by good
demand of piping products. However, rising contribution of value-added
products in the total portfolio helped drive realisation growth to the tune of
6.4% during the same period. The piping segment, contributes ~50% to
the topline, recording sales CAGR of 20% during FY11-15, led by volume
CAGR of 11% during the same period. Volume growth of the piping
segment came on the back of better demand (translated into regular
capacity addition) from the housing segment in tier II and tier III cities. We
believe, rising contribution of value added products in the total portfolio
from 31.7% in FY13 to over 35% by FY20 would help drive realisations
northward for the company.
The topline is expected to grow at a CAGR of ~12%

during FY15-18E to | 5883 crore in FY18E from | 4219
crore during FY15 led by growth in the piping segment
We have modelled revenue CAGR of 12% for FY15-18E (in line with
historical growth rate) largely supported by volume CAGR of ~14% during
the same period. The volume growth is expected to be largely be driven by
strong demand for piping products (volume CAGR ~15%) from the
expansion in the new geographies. Packaging products contribute 21% to
the topline and are expected to record sales CAGR of ~13% supported by
good traction of cross laminated products. Further, industrial segment sales
are expected to grow 11% largely supported by a revival in demand for
automotive and consumer durable segment, going forward. Additionally,
the consumer products segment where the company remained a passive
player for the last few years is expected to record a sales CAGR of 11%
attributable to increasing the focus on the premium product category. In
addition, we have modelled revenue inflow of | 107 crore from sale of real
estate business (~15% lower than the management expectation).
Exhibit 40: Capacity expansion on the cards to drive volume growth
7000
CAGR ~14%
400000
388506
CAGR ~12%
6000
CAGR 14.7%
5000
4000
3000
229302
275463
270647
245700
221918
100000
301930
CAGR 8%
300000
442561
500000
200000
Exhibit 41: Net sales growth driven by piping division
2436
2927
3359
5883
5018
3905
4219
3006
2000
1000
0
0
FY11
FY12
FY13
FY14
FY15 9M'16E FY17E FY18E
FY11
FY12
FY13
FY14
FY15 9M'16E FY17E FY18E

Supreme Industries has a diverse range of products. We

believe sales of the company will grow on the back of rising
investment in infrastructure, housing, packaged foods, sports
goods, potable water supply & sanitation, auto, electronics,
horticulture, floriculture etc.
Exhibit 42: Segment wise revenue break-up

| crore
Plastic Piping
Packaging Products
Industrial Products
Consumer Products
FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E

1036 1320 1691 2060 2113 1609 2874 3278
580 650 700 811 914 658 1007 1328
492 560 607 600 649 497 713 897
262 268 276 259 276 203 347 355
CAGR FY11-15 CAGR 15-18E

19.5
15.8
12.0
13.3
7.2
11.4
1.3
8.7
Source: Company, ICICIdirect.com Research, Financial year FY16 is for 9 month
Page 22
Rising contribution of value added products coupled with lower raw material
prices to drive EBITDA margin
In the last five years, the EBITDA margin has grown ~160 bps to 14.9% on
account of a strong brand, rising contribution of value added products,
lower commodity prices, higher contribution of in-house manufactured
product into sales. We believe raw material (largely derivative of crude oil
like PVC, Polypropylene and Polyethylene) prices will remain subdued in
the near term. The company being a strong brand in the plastic business is
least likely to pass on the entire benefit of lower raw material prices. This
coupled with rising focus on launching premium products and increasing
the contribution of value added products (as value added products
command EBITDTA margin more than 17%) in revenue would drive EBITDA
margins, going forward. The companys value added products like cross
laminated products (Silpaulin) and CPVC have performed well in the last
three years wherein sales recorded CAGR of 11% and 16%, respectively,
with growth in realisation by 5-6% during the same period. We model an
EBITDA margin of ~16% for FY17E & FY18E considering the benefit of
lower raw material prices with rising contribution of value-added products.
The moderate expansion in margin is expected in the backdrop of the
ongoing expansion plan into new geographies, which may seize some
benefits of lower raw material prices, going forward.
We believe raw material (largely derivative of crude oil

like PVC, Polypropylene and Polyethylene) prices will
remain subdued in the near term. As the company has a
strong brand in the plastic business it is least likely to
pass on the entire benefit of lower raw material prices.
We model EBITDA margin of ~16% for FY17E & FY18E
considering benefit of lower raw material prices with
rising contribution of value added products
Exhibit 43: Rising sales coupled with lower RM cost to drive EBITDA
Exhibit 44: Saving from lower material cost to drive EBITDA margin
1200
952.5
812.7
600
400
324.2
433.6
490.7 531.7
630.5
393.2
200
0
FY11
FY12
FY13
FY14
35.6
35.3
16.2
16.2
35.3
35.4
33.8
31.7
33.6
33.3
13.3
14.8
14.6
13.6
14.9
13.0
FY11
FY12
FY13
FY14
FY15 9MFY16E FY17E FY18E
EBITDA margin
Gross Margin
Exhibit 45: Softening price of HDPE (YTD decline ~12% YoY)
Exhibit 46: Decline in LDPE price (YTD decline ~24% YoY)
LDPE price
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
Jan-07
Mar-15
Jan-14
Aug-14
Jun-13
Apr-12
Nov-12
Sep-11
Jul-10
Feb-11
Dec-09
May-09
Oct-08
Mar-08
Jan-07
(|/tonne)
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
Aug-07
(|/tonne)
HDPE price
Jan-15
800
(%)
(| crore)
1000
45
40
35
30
25
20
15
10
5
0
Page 23
Better margin coupled with lower interest outgo to drive PAT CAGR of 16% for
FY15-18E
Over the years, capital expenditure has yielded better
inflow resulting in a reduction in debt by 35% from FY11.
As a result, the companys interest expanses reduced
24% YoY in FY15 helping 100 bps YoY increase in PAT
margin
The company recorded a net profit CAGR of 13% in the last five year led by
increase in sales and EBITDA margin. However, being a capital intensive
business, SIL required continuous capex to fund expansion and working
capital requirement. Over the years, capital expenditure has yielded better
inflows resulting in a reduction in debt by 35% from FY11. As a result, the
interest expanses reduced 24% YoY in FY15 leading to a 100 bps YoY
increase in PAT margin. A further reduction in interest outgo (I-direct view:
reduction by ~19% by the end of FY18E) coupled with sales CAGR ~12%
for FY15-18E would further help in driving PAT growth by 16% for FY1518E.
Exhibit 47: Net profit to grow at ~16% CAGR in FY15-18E
600
500
420.6
CAGR ~13%
FY13
FY14
176.3
100
322.4
200
241.7
300
195.8
company will record CAGR 16% for FY15-18E
400
(| crore)
marginal increase in EBITDA margin, the net profit of the
283.4
believe with a reduction n debt outgo coupled with
CAGR ~16%
290.1
five year led by increase in sales and EBITDA margin. We
500.0
The company recorded a net profit CAGR of 13% in the last
0
FY11
FY12
FY15
9MFY16E
FY17E
FY18E
Exhibit 48: Asset turnover to improve gradually with recovery in demand for plastic products
3.0
2.5
Fixed assets turnover (FAT) of Supreme Industries Limited
2.0
years. We believe, companys operating efficiency to

improve going forward with the stability in the new plants
(x)
has been stable in the range of 2-2.3 during the last five
2.4
2.1
2.0
2.2
2.3
1.5
2.5
2.2
1.5
1.0
0.5
0.0
FY11
FY12
FY13
FY14
FY15
9MFY16
FY17
FY18
Page 24
Strong free cashflow leads to reduction in debt

With efficient working capital management coupled with continuous growth
in earnings, the company has garnered free cash flow of ~| 1062 crore in
the last four years. Due to a strong brand, SIL has power of negotiation with
its dealers to manage receivables days under control. This has helped the
company to fund its capex as well as reduce debt over the years. We
believe the strong fundamental of the company followed by a revival in the
economy would further help generate strong operating cash flow in the
FY17E and FY18E and would help in further reduction in debt level by | 130
crore by FY18E. Consequently, the company recorded a strong return ratio
over the last five years (RoE & RoCE recorded at 27% & 37%, respectively
during FY15).
Supreme Industries has been able to convert its profits to

cash flow from operations. PAT for the last five years
(FY11-15) is| 1333 crore while the Cash Flow from
operation over the similar period is | 2014 crore
450
400
350
300
250
200
150
100
50
0
Exhibit 50: Helps in reduction in debt level
421.0
403.9
368.4
251.7
222.8
(| crore)
(| crore)
Exhibit 49: Strong operating cashflow flows into free cashflow.
84.6
14.6
FY12
FY13
FY14
FY15 9MFY16E FY17E
450
400
350
300
250
200
150
100
50
0
FY18E
410
387
331
281
255
251
201
FY12
FY13
FY14
FY15 9MFY16E FY17E
FY18E
Exhibit 51: Free cash flow to help in reduction in debt level
Exhibit 52: Efficient capital management translates into strong ratios
0.9
50
40
30
(%)
(%)
0
0.4
0.5
0.4
0
FY11
FY12
FY13
FY14
0.3
20
38.9
32.9
35.8
26.4
34.7
33.0
31.8
32.4
27.3
26.6
0.2
0.1
D/E
36.8
26.6
27.6
18.9
10
0.2
34.6
13.4
0
FY11
FY12
FY13
FY14
RoE

RoCE
Source: Company, ICICIdirect.com Research,
Page 25
Risk & concerns

Volatility in crude prices
Major raw materials consumed by the company are poly vinyl chloride
(PVC), polyethylene (PE) and polypropylene (PP), which are linked to crude
prices. SIL imports 50% of raw materials. Thus, a sharp increase in crude
prices could hurt the EBITDA margin of the company as it passes on a rise
in crude price with a lag of two to three weeks.
Exhibit 53: EBITDA margin movement with respect to crude oil price
114
120
82
87
85
16
108
86
70
80
14
12
10
60
(%)
(US$/barrel)
100
111
40
20
0
FY08
FY09
FY10
FY11
Crude oil price
FY12
FY13
FY14
FY15
EBITDA margin
Delay in capacity expansion

Being a capital intensive business, it is necessary for the company to
continuously invest in the business to sustain growth. Sales of the company
may get negatively affected if there is any hurdle (regulatory,
environmental) in the expansion plan.
Influence of government policies in irrigation segment

Use of plastics in agriculture is still in a nascent stage in India. However,
rising awareness on micro irrigation and government subsidies helped the
industry to get good exposure from the agriculture industry. We believe any
change in government policy (in terms of subsidy) could hurt demand for
the products and, thus, sales of the company.
Delay in government flagship programmes

Government programmes like Housing for All, Swachh Bharat and AMRUT
would be a strong boost to the plastic piping industry in India, going
forward. However, any delay in execution of such projects could hurt the
demand for plastic products in India.
Competition from unorganised players

The plastics industry is considered to be highly fragmented, with a large
unorganised segment. Thus, the company has to continuously spend on a
brand building exercise and technological innovations to improve its market
share.
Page 26
Valuation
Supreme Industries, with a plastic processing capacity of over 4,50,000
tonnes in FY15, is one of the largest plastic processors in India. The
company is a pan-India player with 25 manufacturing plants and ~2500strong dealer network. This makes Supreme a strong brand in all plastic
product verticals.
SIL is further planning an aggressive expansion with a capital outlay of
| 1500 crore across business segments for the next five years. This would
increase the companys capacity to over 6.5 lakh tonnes by FY20. We
believe the company would record a revenue CAGR of 12% for FY15-18E
largely supported by volume CAGR of ~14% during the same period. With
the volume growth, the company is also planning to increase the
contribution of value added products in sales to over 35% from 31.7% in
FY13. This would further help in driving the EBITDA margin. The company
has a strong balance sheet with comfortable debt/equity ratio at ~0.3x
(declined from 0.9x during FY11) and strong RoE and RoCE at 27% and
32%, respectively, in FY15. We believe the company would keep
maintaining its return ratios at elevated levels by generating better returns.
It will also continue rewarding shareholders by maintaining a payout ratio of
over 40% in the coming years. If we compare the plastic business with
other leading companies like Astral Polytechnik and Finolex Industries, SIL
performance remains better or in line with its peers.
Historically, the stock has traded at an average one year forward PE
multiple of 17x. At the CMP, the stock is trading at 21x FY17E and 17x
FY18E earnings. We reckon a revival of the plastic industry is on the cards
with a major government infrastructure push as well as continued demand
from tier II and tier III cities. Moreover, a better economic scenario would
lead to a further re-rating of the stock. We believe there are multiple upside
catalysts to our estimate such as visibility of composite cylinder, Silpaulin
and CPVC revenues. We have valued the company on a PE basis by
ascribing PE multiple of 20x FY18 earnings (~24% premium to its historical
average PE). We are initiating coverage on the stock with a BUY rating and
a target price of | 842/share.
Exhibit 55: One year forward P/E (x)
Jun-14
Jun-13
Jun-12
Jun-06
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
0.0
Jun-11
5.0
10x
Jun-10
Avg P/E 17x
15x
Jun-09
15.0
Jun-08
20.0
20x
Jun-07
25.0
10.0
25x
900
800
700
600
500
400
300
200
100
0
30.0
Jun-15
Exhibit 54: Historically, Voltas has traded at average P/E multiple of 17x
Exhibit 56: Competitors valuation matrix (in | crore)

Sales
EBITDA
Net Profit
PE
EV/EBITDA
ROE
Peer group
Cur. Mcap
Supreme Ind
8651 4219 3017 5018 5883
631
393
813
952
322
176
421
500
27
49
21
17
14
22
Finolex Ind
3731 2313 2548 2693 2840
248
414
454
506
110
216
254
293
73
17
15
13
16
10
12
24
26
27
Astral Polytec |
5237 1429 1850 2294 2774
168
243
316
382
76
126
182
213
67
40
28
25
33
22
17
14
16
19
22
21
FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E
11
27
13
Source: Bloomberg, ICICIdirect.com Research
Page 27
27
28
Exhibit 57: Income statement

(Year-end June)
Net Sales
Other Income
Total Revenue
Expenditure
Raw Material Expenses
Cost of goods traded
Cost of premises sold
(increase)/decrease in stock
Employees cost
Power & fuel Exp
Other Expenditure
Total Operating Expenditure
Operating Profit (EBITDA)
Depreciation
Interest
PBT before Exceptional Items
Less: Exceptional Items
PBT after Exceptional Items
Total Tax
PAT before MI
PAT after MI
Profit from Associates
Reported PAT
The consolidated topline of the company is expected to

grow at a CAGR of ~12% during FY15-18E to | 5883
crore in FY18E from | 4220 crore during FY15 supported
piping segment
The companys value added products like cross laminated

products (Silpaulin) and CPVC have performed well in the
last 3 years wherein sales recorded CAGR 11% and 16%
respectively with the growth in realisation by 5-6% during
the same period. We model EBITDA margin of ~16% for
(| crore)
FY14
3,905.2
60.3
3,965.4
FY15
4,219.5
38.1
4,257.6
FY16E*
3,017.1
40.0
3,057.2
FY17E
5,018.4
42.8
5,061.2
FY18E
5,883.0
46.3
5,929.3
2,562.4
164.3
20.8
(59.3)
143.9
139.3
402.0
3,373.4
531.7
101.5
76.1
414.3
414.3
140.0
274.3
274.3
9.1
283.4
2,632.5
169.4
37.3
(0.1)
168.0
146.4
435.4
3,588.9
630.5
139.0
58.0
471.7
471.7
160.0
311.7
311.7
10.6
322.4
1,856.8
123.3
9.0
30.9
122.8
116.1
365.0
2,623.9
393.2
114.7
47.3
271.2
271.2
93.1
178.1
178.1
(1.8)
176.3
2,966.9
263.3
22.8
225.0
197.4
530.3
4,205.6
812.7
190.7
45.3
619.5
619.5
210.8
408.7
408.7
11.9
420.6
3,489.8
315.0
3.9
270.8
230.6
620.4
4,930.5
952.5
223.6
38.4
736.8
736.8
250.9
485.9
485.9
14.1
500.0
Source: Company, ICICIdirect.com Research, * FY16E Period is 9 months due to change in Financial year
FY17E & FY18E considering benefit of lower raw material

prices with rising contribution of value added products.
Exhibit 58: Balance sheet
The company recorded a net profit CAGR of 13% in the

last five year led by increase in sales and EBITDA margin.
We believe, with a reduction in debt outgo coupled with
marginal increase in EBITDA margin, net profit of the
company will record CAGR 16% for FY15-18E
(Year-end June)
Equity Capital
Reserve and Surplus
Total Shareholders funds
Total Debt
Deferred Tax Liability
Total Liabilities
FY14
25.4
1,013.8
1,039.2
387.4
116.8
1,543.3
FY15
25.4
1,186.1
1,211.5
331.5
89.5
1,632.5
FY16E*
25.4
1,286.1
1,311.5
281.5
89.5
1,682.5
FY17E
25.4
1,554.3
1,579.7
251.5
89.5
1,920.7
FY18E
25.4
1,787.5
1,812.9
201.5
89.5
2,103.9
Gross Block
Accumulated Depreciation
Net Block
Capital WIP
Total Fixed Assets
Other Investments
Inventory
Debtors
Loans and Advances
Other Current Assets
Cash
Total Current Assets
Creditors
Provisions
Total Current Liabilities
Net Current Assets
Long term loans and advances
Other Non Current
Total Asset
1,753.8
665.9
1,087.9
18.1
1,106.0
107.4
497.6
234.8
136.2
1.6
24.6
894.9
277.7
112.2
633.4
261.5
68.2
1,543.3
1,844.5
812.0
1,032.5
99.8
1,132.3
120.7
464.7
238.0
126.2
1.4
181.8
1,012.1
300.4
165.7
724.5
287.6
91.7
1,632.5
2,044.5
926.7
1,117.9
99.8
1,217.7
120.7
493.7
241.4
90.3
1.0
92.8
919.1
285.3
198.7
668.6
250.4
93.5
1,682.5
2,244.5
1,117.4
1,127.2
99.8
1,227.0
220.7
632.5
330.0
150.1
1.6
116.7
1,230.9
357.5
249.0
913.7
317.2
155.6
1,920.7
2,394.5
1,340.9
1,053.6
99.8
1,153.4
370.7
757.5
402.9
176.0
1.9
130.0
1,468.3
419.1
291.9
1,071.1
397.2
182.4
2,103.9
Page 28
Exhibit 59: Cash flow statement
Supreme Industries has been able to convert its profits in

to cash flow from operations. PAT for last five years
(FY11-15) is | 1333 crore, while the cash flow from
operation over a similar period is | 2014 crore
(Year-end March)
FY14
FY15
FY16E*
FY17E
FY18E
Profit/(Loss) after taxation

Add: Depreciation & Amortization
Add: Interest Paid
C/F bef working cap changes
Net Increase in Current Assets
Net Increase in Current Liabilities
Net cash flow from operating activities
283.4
101.5
76.1
322.4
139.0
58.0
176.3
114.7
47.3
420.6
190.7
45.3
500.0
223.6
38.4
(80.1)
(19.3)
361.7
40.0
91.1
650.4
3.9
(55.9)
286.4
(287.9)
245.0
613.8
(224.2)
157.4
695.2
(Inc)/Dec in Other Investments

(Purchase)/Sale of Fixed Assets
Net Cash flow from Investing Activities
2.5
(146.7)
(138.9)
(13.3)
(165.3)
(229.3)
(200.0)
(201.8)
(100.0)
(200.0)
(362.0)
(150.0)
(150.0)
(326.8)
Proceeds/(Rep) of debt
(Payment) of Dividend and Dividend Tax
Net Cash flow from Financing Activities
Net Cash flow
Cash & Cash Equ at the begin.
Cash & Cash Equ at the end
(22.7)
(118.9)
(222.1)
0.8
23.9
24.6
(55.9)
(137.2)
(263.8)
157.2
24.6
181.8
(50.0)
(76.2)
(173.6)
(89.1)
181.8
92.8
(30.0)
(152.4)
(227.8)
24.0
92.8
116.7
(50.0)
(266.7)
(355.1)
13.2
116.7
130.0
Exhibit 60: Ratio analysis
We expect the company to maintain high RoE and RoCE

considering 1) Healthy topline growth backed by capex
plan 2) Maintaining higher operating margin 3) Efficient
working capital management turning lower debt/equity
ratio
(Year-end June)
Per share data (|)
EPS
Cash EPS
BV per share
DPS
Operating Ratios (%)
EBITDA Margin
PAT Margin
Turnover Days
Inventory Days
Debtor Days
Creditor Days
Return Ratios (%)
RoNW
RoCE
RoIC
Valuation Ratios (x)
P/E
EV / EBITDA
EV / Net Sales
Market Cap / Sales
Price to Book Value
Solvency Ratios
Debt / EBITDA
Debt / Equity
Current Ratio
Quick Ratio
FY14
FY15
FY16E*
FY17E
FY18E
22.3
30.3
81.8
9.4
25.4
36.3
95.4
10.8
13.9
22.9
103.2
6.0
33.1
48.1
124.4
12.0
39.4
57.0
142.7
21.0
13.6
7.3
14.9
7.6
13.0
5.8
16.2
8.4
16.2
8.5
46.5
21.9
26.0
40.2
20.6
26.0
59.7
29.2
34.5
46.0
24.0
26.0
47.0
25.0
26.0
27.3
31.8
25.7
26.6
32.4
32.4
13.4
18.9
17.6
26.6
34.6
33.5
27.6
36.8
35.5
30.5
17.0
2.3
2.2
8.3
26.8
14.0
2.1
2.1
7.1
49.1
22.5
2.9
2.9
6.6
20.6
10.8
1.8
1.7
5.5
17.3
9.2
1.5
1.5
4.8
0.7
0.4
2.2
0.5
0.3
1.8
0.7
0.2
1.7
0.3
0.2
1.8
0.2
0.1
1.9
1.0
0.8
0.7
0.8
0.8
Page 29
RATING RATIONALE
ANALYST CERTIFICATION
ICICIdirect.com
endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
We /I, Abhishek Shindadkar, MBA and Hardik Varma, MBA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report
ratings
to our
itsviews
stocks
according
tosecurities.
their We
notional
target
vs. current
price
and
then
themor
accurately reflect
about the
subject issuer(s) or
also certify that
no part ofprice
our compensation
was, is, or market
will be directly
or indirectly
related
to thecategorises
specific recommendation(s)
view(s) in this report.
as
Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
Terms & conditions and other disclosures:
target
price is defined as the analysts' valuation for a stock.
ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is
a wholly-owned subsidiary of ICICI Bank which is Indias largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general
insurance, venture capital fund management, etc. (associates), the details in respect of which are available on www.icicibank.com.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking
Buy:
caps/midcaps,
and other>10%/15%
business relationshipfor
with alarge
significant
percentage of companiesrespectively;
covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts
and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
Hold:
Up to +/-10%;
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and
Sell:
-10% or more;
meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without
prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securitiesis is under no obligation to update or keep the information
current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended
temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this
company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This
report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their
receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific
circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate
the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any
loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the
risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to
change without notice.
Pankaj Pandey
Head Research
pankaj.pandey@icicisecurities.com
ICICIdirect.com Research Desk,

ICICI Securities Limited,
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in the past twelve months.
1st Floor, Akruti Trade Centre,
Road
No
7, MIDC,
ICICI Securities or its associates might have received any compensation
from the
companies
mentioned in the report during the period preceding twelve months from the date of this report for services in
respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.
Andheri (East)
ICICI Securities or its associates might have received any compensation
for productsor400
services
other than investment banking or merchant banking or brokerage services from the companies mentioned
Mumbai
093
in the report in the past twelve months.
research@icicidirect.com
ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation
or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any
material conflict of interest at the time of publication of this report.
It is confirmed that Abhishek Shindadkar, MBA and Hardik Varma, MBA, Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding
twelve months.
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the
publication of the research report.
Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject
company/companies mentioned in this report.
It is confirmed that Abhishek Shindadkar, MBA and Hardik Varma, MBA, Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.
ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.
We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,
publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities
described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and
to observe such restriction.
Page 30
ANALYST CERTIFICATION
We /I, Sanjay Manyal, MBA (Finance) and Hitesh Taunk, MBA (Finance), Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research
report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s)
or view(s) in this report.
Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking
and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is Indias largest private sector bank and
has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (associates), the details in respect of
which are available on www.icicibank.com.
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking
and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts
and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and
meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without
prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securitiesis is under no obligation to update or keep the information
current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended
temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this
company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This
report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their
receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific
circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate
the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any
loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the
risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to
change without notice.
ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment
in the past twelve months.
ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in
respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.
ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned
in the report in the past twelve months.
ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation
or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any
material conflict of interest at the time of publication of this report.
It is confirmed that Sanjay Manyal, MBA (Finance) and Hitesh Taunk, MBA (Finance), Research Analysts of this report have not received any compensation from the companies mentioned in the report in
the preceding twelve months.
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the
publication of the research report.
Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject
company/companies mentioned in this report.
It is confirmed Sanjay Manyal, MBA (Finance) and Hitesh Taunk, MBA (Finance), Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.
ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.
We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,
publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities
described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and
to observe such restriction.
Page 31

Supreme Industries (SUPIND) : Supreme in Plastic Industry..

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Supreme Industries (SUPIND) : Supreme in Plastic Industry..

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Initiating Coverage

Supreme Industries (SUPIND)

YoY Growth (%)

Current & target multiple

Comparative return matrix (%)

Piping, packaging segment to drive future growth

Supreme in plastic industry...

Valued added products (VAP): Play on premiumisation

Strong fundamental justifies premium valuations

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Shareholding pattern (Q1FY16)

Institutional holding trend (%)

Founded in 1942, Supreme Industries (SIL) is Indias leading plastics

Exhibit 2: Revenue break-up in FY15

Exhibit 3: Revenue break-up of plastic segment

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Exhibit 4: Comprehensive portfolio and target customer segment

Target Customer segment

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Exhibit 5: Companys milestone

Starts manufacturing of multilayer sheet

Taparia family takes control of company through

Founded by Kantilal K Mody to

Ties up with Manducher of France for upgradation of

Start of new plant at Noida with a capacity

Supreme Petrochem signs MoU with Ultrabatch

Introduces new range of plumbing and fittings

Expanding footprints to eastern and southern

Enters flexible packaging division, Siltap

Source: ICICIdirect.com Research

Exhibit 6: Manufacturing facilities spread across India

Supreme Industries manufacturing plants are located

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

According to FICCI, the plastic processing industry is

Exhibit 8: Plastic processing industry growth trend

Exhibit 7: Demand of plastic products (in volume)

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Plastic processing industry: Huge growth potential

The domestic downstream industry comprises three broad

automobile, consumer durable, healthcare, etc

Bottles, containers, toys and housewares

Large circular tanks such as water tanks

Source: Company, ICICIdirect.com Research

Extrusion moulding is the most commonly used plastic processing method.

ICICI Securities Ltd | Retail Equity Research

disposable consumer goods. Products from other moulding processes

Over 30,000 units in the organised/unorganised sector are

Source: Company, ICICIdirect.com Research

Per capita consumption: India among lowest globally

Lower per capita consumption

Source: Company, ICICIdirect.com Research

Use of plastic products in agriculture

Exhibit 12: Utilisation of plastic products

Exhibit 11: Per capital plastic product consumptions (kg/person)

the US (~109 kg) and China (~45 kg)

kg/person) is still much below (~9.7 kg) other nations like

Per capita consumption of plastic products in India (in

Source: FICCI, ICICIdirect.com Research, FY13 figures